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M&T Bank Corporation Announces Third Quarter Results
PRNewswire-FirstCall
BUFFALO, N.Y.

M&T Bank Corporation ("M&T") today reported its results of operations for the quarter ended September 30, 2005.

GAAP Results of Operations. Diluted earnings per share measured in accordance with generally accepted accounting principles ("GAAP") for the third quarter of 2005 were $1.64, up 5% from $1.56 in the year-earlier period. On the same basis, net income in the recent quarter totaled $191 million, 2% higher than $186 million in the third quarter of 2004. GAAP-basis net income for 2005's third quarter expressed as an annualized rate of return on average assets and average common stockholders' equity was 1.39% and 12.97%, respectively, compared with 1.42% and 13.02%, respectively, in the year- earlier quarter.

The recent quarter's results reflect a $29 million non-cash, other-than- temporary impairment charge related to preferred stock issuances of the Federal National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). The write-down was taken on $133 million of variable-rate preferred securities that M&T continues to hold. Although the securities are still rated as investment grade, M&T recognized the impairment charge at this time, in accordance with GAAP, in light of changing circumstances during the recent quarter that included an announced further delay in FNMA's ability to provide restated financial information about its results of operations until late 2006 and a further decline in the market value of certain of FHLMC's preferred stock issuances following its release of operating results. However, because the preferred securities have been held by M&T in its available-for-sale investment securities portfolio, the unrealized losses had already been recorded as reductions of other comprehensive income and, therefore, no incremental reductions of investment securities or stockholders' equity were required. Accordingly, the accounting treatment for the impairment charge made pursuant to GAAP had no significant effect on M&T's consolidated balance sheet. As a result of the impairment charge and the recognition of available income tax benefits, M&T's reported net income in the recent quarter was reduced by $18 million, or $.16 of diluted earnings per share.

Results for the third quarter of last year also included certain notable events. M&T reorganized certain of its subsidiaries in 2004's third quarter which decreased M&T's effective state income tax rate for that quarter. As a result, both M&T's income tax expense during the third quarter of 2004 and M&T's deferred tax liability at September 30, 2004 were reduced by $12 million. In addition, M&T Bank, a wholly owned subsidiary of M&T, made a tax- deductible $25 million cash contribution to The M&T Charitable Foundation, a tax-exempt private charitable foundation, which increased "other expense" by the amount of the contribution while reducing income tax expense by $10 million. The aggregate impact of these events was to decrease net income in the third quarter of 2004 by $3 million or $.02 of diluted earnings per share.

Commenting on M&T's third quarter results, Rene F. Jones, Senior Vice President and Chief Financial Officer, stated, "Although the recent quarter's performance was affected by the non-cash write-down of the preferred stock of certain government-sponsored entities, we are nevertheless pleased with our results. Our ability to contain expenses during a period of slow industry-wide revenue growth is in part attributable to success in our areas of focus initially described in the 2004 Annual Report to Stockholders. That success is reflected in the year-over-year improvement in our efficiency ratio. Furthermore, credit quality continued to be very good as reflected in the relatively low levels of net charge-offs and nonperforming loans."

For the first three quarters of 2005, GAAP-basis diluted earnings per share increased 13% to $4.95 from $4.39 in the comparable year-earlier period. On the same basis, net income for the first nine months of 2005 totaled $577 million, up 9% from the $530 million earned in the similar 2004 period. GAAP- basis net income for the nine-month period ended September 30, 2005 expressed as an annualized rate of return on average assets and average common stockholders' equity was 1.43% and 13.37%, respectively, compared with 1.39% and 12.44%, respectively, in the corresponding 2004 period.

Supplemental Reporting of Non-GAAP Results of Operations. Since 1998, M&T has consistently provided supplemental reporting of its results on a "net operating" or "tangible" basis, from which M&T excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts) and expenses associated with merging acquired operations into M&T, because such expenses are considered by management to be "nonoperating" in nature. Although "net operating income" as defined by M&T is not a GAAP measure, M&T's management believes that this information helps investors understand the effect of acquisition activity in reported results. Amortization of core deposit and other intangible assets, after tax effect, totaled $9 million ($.08 per diluted share) in the recent quarter, compared with $11 million ($.09 per diluted share) in the third quarter of 2004. Similar amortization charges, after tax effect, for the nine-month periods ended September 30, 2005 and 2004 were $27 million ($.23 per diluted share) and $36 million ($.30 per diluted share), respectively. There were no merger- related expenses in either 2005 or 2004.

Reflecting the impact of each year's third quarter events described earlier, diluted net operating earnings per share, which exclude amortization of core deposit and other intangible assets, were $1.72 in the third quarter of 2005, up 4% from $1.65 in the year-earlier quarter. Net operating income totaled $200 million and $198 million in the third quarter of 2005 and 2004, respectively. Expressed as an annualized rate of return on average tangible assets and average tangible stockholders' equity, net operating income was 1.54% and 27.67%, respectively, in 2005's third quarter, compared with 1.60% and 29.42% in the year-earlier quarter.

Diluted net operating earnings per share for the nine-month period ended September 30, 2005 rose 10% to $5.18 from $4.69 in the similar period of 2004. For the first nine months of 2005, net operating income totaled $604 million, 7% higher than $566 million in the year-earlier period. Expressed as an annualized rate of return on average tangible assets and average tangible equity, net operating income for the first three quarters of 2005 was 1.59% and 29.04%, respectively, compared with 1.58% and 28.45% in the first nine months of 2004.

Reconciliation of GAAP and Non-GAAP Results of Operations. A reconciliation of diluted earnings per share and net income with diluted net operating earnings per share and net operating income follows:

                                   Three months ended    Nine months ended
                                      September 30         September 30
                                      2005     2004        2005    2004
                                      ----     ----        ----    ----
                                        (in thousands, except per share)

  Diluted earnings per share      $   1.64     1.56        4.95     4.39
  Amortization of core deposit
   and other intangible assets(1)      .08      .09         .23      .30
                                   -------  -------     -------  -------
  Diluted net operating earnings
   per share                      $   1.72     1.65        5.18     4.69
                                  ========  =======     =======  =======

  Net income                      $191,074  186,441     577,198  530,316
  Amortization of core deposit
   and other intangible assets(1)    8,503   11,381      26,929   36,087
                                   -------  -------     -------  -------
  Net operating income            $199,577  197,822     604,127  566,403
                                   =======  =======     =======  =======
   (1) After any related tax effect


Reconciliation of Total Assets and Equity to Tangible Assets and Equity. A reconciliation of average assets and equity with average tangible assets and average tangible equity follows:

                                  Three months ended   Nine months ended
                                     September 30        September 30
                                     2005     2004       2005     2004
                                     ----     ----       ----     ----
                                              (in millions)

  Average assets                  $54,444   52,170     53,899   51,116
  Goodwill                         (2,904)  (2,904)    (2,904)  (2,904)
  Core deposit and other
   intangible assets                 (128)    (191)      (142)    (210)
  Deferred taxes                       49        -         55        -
                                  -------  -------    -------  -------
  Average tangible assets         $51,461   49,075     50,908   48,002
                                  =======  =======    =======  =======
  Average equity                  $ 5,845    5,697      5,772    5,694
  Goodwill                         (2,904)  (2,904)    (2,904)  (2,904)
  Core deposit and other
   intangible assets                (128)    (191)      (142)    (210)
  Deferred taxes                       49       73         55       80
                                  -------  -------    -------  -------
  Average tangible equity         $ 2,862    2,675      2,781    2,660
                                  =======  =======    =======  =======

Taxable-equivalent Net Interest Income. Taxable-equivalent net interest income increased to $460 million in the third quarter of 2005 from $444 million in the year-earlier quarter. Average loans outstanding totaled $39.9 billion in the recent quarter, compared with $37.6 billion in the third quarter of 2004. Largely offsetting the favorable impact of higher outstanding loan balances was a narrowing of M&T's net interest margin, or taxable-equivalent net interest income expressed as an annualized percentage of average earning assets, to 3.76% in 2005's third quarter from 3.85% in the corresponding period of 2004.

Provision for Credit Losses/Asset Quality. The provision for credit losses totaled $22 million in the recent quarter, compared with $17 million in the third quarter of 2004. Expressed as an annualized percentage of average loans outstanding, net charge-offs were .21% in the third quarter of 2005, compared with .16% in the corresponding 2004 period. In dollar total, net charge-offs during the third quarter of 2005 and 2004 were $22 million and $15 million, respectively.

Loans classified as nonperforming totaled $166 million, or .41% of total loans at the recent quarter-end, improved from $181 million or .48% at September 30, 2004. Loans past due 90 days or more and accruing interest totaled $131 million at September 30, 2005, compared with $140 million a year earlier. Included in these loans at September 30, 2005 and 2004 were $107 million and $111 million, respectively, of loans guaranteed by government-related entities.

Allowance for Credit Losses. The allowance for credit losses totaled $638 million, or 1.58% of total loans, at September 30, 2005, compared with $626 million, or 1.65%, a year earlier. The decline in the allowance as a percentage of loans reflects improvement in various credit factors and the relatively low levels of net loan charge-offs and nonperforming loans. At December 31, 2004, the allowance for credit losses totaled $627 million, or 1.63% of total loans. The ratio of M&T's allowance for credit losses to nonperforming loans was 383%, 346% and 364% at September 30, 2005, September 30, 2004 and December 31, 2004, respectively.

Noninterest Income and Expense. Noninterest income in the recent quarter totaled $221 million, down 10% from $245 million in the year-earlier quarter. The decrease was the result of the previously discussed $29 million non-cash accounting charge recognized during the recent quarter for the other-than- temporary decline in value of the preferred stock of FNMA and FHLMC, partially offset by increases in mortgage banking and other revenues.

Noninterest expense in the third quarter of 2005 totaled $368 million, down from $407 million in 2004's third quarter. Included in such amounts are expenses considered to be nonoperating in nature consisting of amortization of core deposit and other intangible assets of $14 million in 2005 and $19 million in 2004. Exclusive of those nonoperating expenses, noninterest operating expenses were $354 million in the recent quarter, down $34 million from $388 million in the third quarter of 2004. The higher operating expenses in 2004's third quarter resulted largely from the previously noted $25 million charitable contribution made in that period. Also contributing to the lower level of operating expenses in 2005 was a $6 million partial reversal of the valuation allowance for the impairment of capitalized mortgage servicing rights recorded during the recently completed quarter. The reduction of the valuation allowance reflects an increase in the value of capitalized mortgage servicing rights resulting from higher residential mortgage loan interest rates at September 30, 2005 as compared with a quarter earlier. A $7 million addition to the valuation allowance for the impairment of capitalized mortgage servicing rights was recorded during the third quarter of 2004, largely the result of the lower interest rate environment that existed at the end of that quarter as compared with June 30, 2004.

The efficiency ratio, or noninterest operating expenses divided by the sum of taxable-equivalent net interest income and noninterest income (exclusive of gains and losses from bank investment securities), measures the relationship of operating expenses to revenues. M&T's efficiency ratio was 50.0% in the third quarter of 2005, improved significantly from 56.4% in the year-earlier period. If the $25 million charitable contribution was excluded from the computation, M&T's efficiency ratio during 2004's third quarter would have been 52.7%.

Balance Sheet. M&T had total assets of $54.8 billion at September 30, 2005, up from $52.9 billion at September 30, 2004. Loans and leases, net of unearned discount, aggregated $40.3 billion at September 30, 2005, compared with $38.0 billion a year earlier. Deposits totaled $37.2 billion at the recent quarter-end, up from $35.0 billion at September 30, 2004. Total stockholders' equity was $5.8 billion at September 30, 2005, representing 10.66% of total assets, compared with $5.7 billion or 10.80% a year earlier. Common stockholders' equity per share was $51.81 and $49.11 at September 30, 2005 and 2004, respectively. Tangible equity per common share was $25.42 at September 30, 2005, compared with $23.17 at September 30, 2004. In the calculation of tangible equity per common share, stockholders' equity is reduced by the carrying values of goodwill and core deposit and other intangible assets, net of applicable deferred tax balances, which aggregated $3.0 billion at September 30, 2005 and 2004.

In December 2004, M&T announced that it had been authorized by its Board of Directors to purchase up to 5,000,000 shares of its common stock. During the recent quarter, 1,449,700 shares of common stock were repurchased by M&T pursuant to such plan at an average cost per share of $107.06. Through September 30, 2005, M&T had repurchased 4,093,000 shares of its common stock pursuant to the plan at an average cost of $103.62 per share.

Conference Call. Investors will have an opportunity to listen to M&T's conference call to discuss third quarter financial results today at 9:00 a.m. Eastern Daylight Saving Time. Those wishing to participate in the call may dial 877-780-2276. International participants, using any applicable international calling codes, may dial 973-582-2700. The conference call will also be webcast live on M&T's website at http://ir.mandtbank.com/conference.cfm. A replay of the call will be available until Thursday, October 13, 2005 by calling 877-519-4471, code 6480553 and 973-341-3080 for international participants. The event will also be archived and available by 3:00 p.m. today on M&T's website at http://ir.mandtbank.com/conference.cfm.

Forward-Looking Statements. This news release contains forward-looking statements that are based on current expectations, estimates and projections about M&T's business, management's beliefs and assumptions made by management. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Future Factors") which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.

Future Factors include changes in interest rates, spreads on earning assets and interest-bearing liabilities, and interest rate sensitivity; prepayment speeds, loan originations and credit losses; sources of liquidity; common shares outstanding; common stock price volatility; fair value of and number of stock-based compensation awards to be issued in future periods; legislation affecting the financial services industry as a whole, and M&T and its subsidiaries individually or collectively; regulatory supervision and oversight, including required capital levels; increasing price and product/service competition by competitors, including new entrants; rapid technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; the mix of products/services; containing costs and expenses; governmental and public policy changes; protection and validity of intellectual property rights; reliance on large customers; technological, implementation and cost/financial risks in large, multi-year contracts; the outcome of pending and future litigation and governmental proceedings; continued availability of financing; financial resources in the amounts, at the times and on the terms required to support M&T and its subsidiaries' future businesses; and material differences in the actual financial results of merger and acquisition activities compared with M&T's initial expectations, including the full realization of anticipated cost savings and revenue enhancements.

These are representative of the Future Factors that could affect the outcome of the forward-looking statements. In addition, such statements could be affected by general industry and market conditions and growth rates, general economic and political conditions, either nationally or in the states in which M&T and its subsidiaries do business, including interest rate and currency exchange rate fluctuations, changes and trends in the securities markets, and other Future Factors.

  M&T BANK CORPORATION
  Financial Highlights

  Amounts in thousands
  except per share

                          Three months ended         Nine months ended
                            September 30               September 30
                          ---------------            ----------------
                          2005      2004  Change       2005     2004  Change
                         -----     -----  ------      -----    -----  ------
  Performance

  Net income          $191,074   186,441     2%    $577,198    530,316    9%

  Per common share:
   Basic earnings     $   1.68      1.59     6%    $   5.06       4.48   13%
   Diluted earnings       1.64      1.56     5         4.95       4.39   13
   Cash dividends     $    .45       .40    13     $   1.30       1.20    8

  Common shares
   outstanding:
   Average -
    diluted (1)        116,200   119,665    -3%     116,598    120,874   -4%
   Period end (2)      112,848   116,274    -3      112,848    116,274   -3

  Return on (annualized):
   Average total
    assets                1.39%     1.42%              1.43%      1.39%
   Average common
    stockholders'
    equity               12.97%    13.02%             13.37%     12.44%

  Taxable-equivalent
   net interest
   income             $459,553   443,827     4%  $1,357,493  1,305,645    4%

  Yield on average
   earning assets         5.94%     5.10%              5.72%      5.08%
  Cost of
   interest-bearing
   liabilities            2.64%     1.53%             2.35%      1.45%

  Net interest spread     3.30%     3.57%             3.37%      3.63%
  Contribution of
   interest-free funds     .46%      .28%              .42%       .27%
  Net interest margin     3.76%     3.85%             3.79%      3.90%

  Net charge-offs to
   average total
   net loans
   (annualized)            .21%      .16%              .18%       .20%

  Net operating results (3)

  Net operating
   income             $199,577   197,822      1%  $604,127    566,403    7%
  Diluted net
   operating
   earnings per
   common share           1.72      1.65     4        5.18       4.69   10
  Return on (annualized):
   Average tangible
    assets                1.54%     1.60%             1.59%      1.58%
   Average tangible
    common equity        27.67%    29.42%            29.04%     28.45%
  Efficiency ratio       49.97%    56.38%            51.38%     54.52%


                          At September 30
                       ------------------
  Loan quality             2005      2004   Change
                       --------   -------  ------
  Nonaccrual loans     $154,768   171,807   -10%
  Renegotiated loans     11,697     9,051    29
                       --------   -------
    Total non-
     performing
     loans             $166,465   180,858    -8%
                       ========   =======
  Accruing loans
   past due 90 days
   or more             $130,944   139,541    -6%

  Nonperforming loans
   to total net loans       .41%      .48%
  Allowance for credit
   losses to total
   net loans               1.58%     1.65%

   (1) Includes common stock equivalents.
   (2) Includes common stock issuable under deferred compensation plans.
   (3) Excludes amortization and balances related to goodwill and core
       deposit and other intangible assets and merger-related expenses
       which, except in the calculation of the efficiency ratio, are net of
       applicable income tax effects. A reconciliation of net income and net
       operating income is included herein.

  M&T BANK CORPORATION
  Condensed Consolidated Statement of Income

  Dollars in thousands

                       Three months ended           Nine months ended
                         September 30                  September 30
                     -----------------          --------------------
                        2005      2004  Change       2005       2004  Change
                     -------   -------  ------  ---------  --------- -------

  Interest income   $720,754   583,052    24%  $2,035,593  1,689,785   20%
  Interest expense   265,576   143,771    85      690,858    397,405   74
                     -------   -------          ---------  ---------
  Net interest
   income            455,178   439,281     4    1,344,735  1,292,380    4

  Provision for
   credit losses      22,000    17,000    29       65,000     67,000   -3
                     -------   -------          ---------  ---------
  Net interest income
   after provision
   for credit losses 433,178   422,281     3    1,279,735  1,225,380    4

  Other income
    Mortgage banking
     revenues         35,345    32,064    10      100,045     90,456   11
    Service charges
     on deposit
     accounts         94,878    93,849     1      276,200    273,278    1
    Trust income      33,748    33,713     -      100,016    101,875   -2
    Brokerage services
     income           13,685    13,360     2       42,045     40,458    4
    Trading account
     and foreign
     exchange gains    6,326     3,325    90       17,152     12,292   40
    Gain (loss) on
     bank investment
     securities      (27,995)        -     -      (27,749)     2,512    -
    Other revenues
     from operations  65,507    68,614    -5      193,405    184,539    5
                     -------   -------          ---------  ---------
       Total other
        income       221,494   244,925   -10      701,114    705,410   -1

  Other expense
    Salaries and
     employee
     benefits        207,705   205,003     1      618,922    608,400    2
    Equipment and
     net occupancy    43,033    42,686     1      129,647    134,869   -4
    Printing, postage
     and supplies      8,684     8,103     7       25,926     26,489   -2
    Amortization of
     core deposit
     and other
     intangible
     assets           13,926    18,619   -25       44,102     59,017  -25
    Other costs of
     operations       94,902   132,511   -28      297,431    325,321   -9
                     -------   -------          ---------  ---------
       Total other
        expense      368,250   406,922   -10    1,116,028  1,154,096   -3

  Income before
   income taxes      286,422   260,284    10      864,821    776,694   11

  Applicable income
   taxes              95,348    73,843    29      287,623    246,378   17
                     -------   -------          ---------  ---------
  Net income        $191,074   186,441     2%  $  577,198    530,316    9%
                     =======   =======          =========  =========


  M&T BANK CORPORATION
  Condensed Consolidated Balance Sheet

  Dollars in thousands

                                                 September 30
                                          -----------------------
                                              2005         2004     Change
                                          ----------    ---------   ------
  ASSETS

  Cash and due from banks                $ 1,401,790    1,754,040    -20%

  Money-market assets                        217,925      173,235     26

  Investment securities                    8,230,447    8,437,288     -2

  Loans and leases, net of unearned
   discount                               40,334,607   37,950,316      6
    Less: allowance for credit losses        637,819      626,344      2
                                          ----------   ----------
    Net loans and leases                  39,696,788   37,323,972      6

  Goodwill                                 2,904,081    2,904,081      -

  Core deposit and other intangible
   assets                                    121,405      181,814    -33

  Other assets                             2,268,913    2,112,470      7
                                          ----------   ----------
    Total assets                         $54,841,349   52,886,900      4%
                                          ==========   ==========

  LIABILITIES AND STOCKHOLDERS' EQUITY

  Noninterest-bearing deposits at U.S.
   offices                               $ 8,067,788    8,416,476     -4%

  Other deposits at U.S. offices          24,948,861   22,774,156     10

  Deposits at foreign office               4,182,366    3,785,067     10
                                          ----------   ----------
    Total deposits                        37,199,015   34,975,699      6

  Short-term borrowings                    4,198,206    5,650,533    -26

  Accrued interest and other
   liabilities                               742,442      834,860    -11

  Long-term borrowings                     6,854,663    5,715,508     20
                                          ----------   ----------
    Total liabilities                     48,994,326   47,176,600      4

  Stockholders' equity (1)                 5,847,023    5,710,300      2
                                          ----------   ----------
    Total liabilities and stockholders'
     equity                              $54,841,349   52,886,900      4%
                                          ==========   ==========

   (1) Reflects accumulated other comprehensive loss, net of applicable
       income tax effect, of $45.3 million at September 30, 2005 and
       accumulated other comprehensive income, net of applicable income tax
       effect, of $85 thousand at September 30, 2004.


  M&T BANK CORPORATION
  Condensed Consolidated Average Balance Sheet
   and Annualized Taxable-equivalent Rates

  Dollars in millions

                                          Three months ended
                                              September 30
                                   -------------------------------
                                         2005             2004
                                   --------------    ------------- Change in
                                   Balance   Rate    Balance  Rate  balance
                                   -------  -----    -------  ----  -------
  ASSETS

  Money-market assets              $   129  2.42%        68   .72%     89%

  Investment securities              8,439  4.41      8,195  4.16       3

  Loans and leases, net of
   unearned discount
    Commercial, financial, etc.     10,497  5.71      9,648  4.29       9
    Real estate - commercial        14,351  6.86     13,669  5.77       5
    Real estate - consumer           4,268  5.99      2,980  5.95      43
    Consumer                        10,763  6.25     11,314  5.50      -5
                                    ------           ------
       Total loans and leases, net  39,879  6.27     37,611  5.31       6
                                    ------           ------
    Total earning assets            48,447  5.94     45,874  5.10       6

  Goodwill                           2,904            2,904             -

  Core deposit and other
   intangible assets                   128              191           -33

  Other assets                       2,965            3,201            -7
                                    ------           ------
    Total assets                   $54,444           52,170             4%
                                    ======           ======

  LIABILITIES AND STOCKHOLDERS'
   EQUITY

  Interest-bearing deposits
    NOW accounts                   $   400   .60        349   .28      15%
    Savings deposits                14,822  1.00     15,432   .57      -4
    Time deposits                    9,540  3.30      7,265  2.20      31
    Deposits at foreign office       4,005  3.42      3,334  1.42      20
                                    ------           ------
      Total interest-bearing
        deposits                    28,767  2.09     26,380  1.12       9
                                    ------           ------
  Short-term borrowings              4,779  3.50      5,281  1.46      -9
  Long-term borrowings               6,373  4.46      5,789  3.44      10
                                    ------           ------
  Total interest-bearing
   liabilities                      39,919  2.64     37,450  1.53       7

  Noninterest-bearing deposits       7,941            8,189            -3

  Other liabilities                    739              834           -11
                                    ------           ------
    Total liabilities               48,599           46,473             5

  Stockholders' equity               5,845            5,697             3
                                    ------           ------
    Total liabilities and
     stockholders' equity          $54,444           52,170             4%
                                    ======           ======

  Net interest spread                       3.30             3.57
  Contribution of interest-free
   funds                                     .46              .28
  Net interest margin                       3.76%            3.85%


  M&T BANK CORPORATION
  Condensed Consolidated Average Balance Sheet
   and Annualized Taxable-equivalent Rates

                                          Nine months ended
                                            September 30
                                   ------------------------------
  Dollars in millions                  2005              2004
                                   -------------    ------------- Change in
                                   Balance  Rate    Balance  Rate  balance
  ASSETS                           -------  ----    -------  ----  -------

  Money-market assets              $   108  2.00%        76   .82%     42%

  Investment securities              8,535  4.37      7,886  4.14       8

  Loans and leases, net of
   unearned discount
    Commercial, financial, etc.     10,360  5.43      9,405  4.22      10
    Real estate - commercial        14,315  6.44     13,053  5.69      10
    Real estate - consumer           3,672  5.98      3,093  5.93      19
    Consumer                        10,887  6.03     11,238  5.54      -3
                                    ------           ------
       Total loans and leases, net  39,234  6.02     36,789  5.30       7
                                    ------           ------
    Total earning assets            47,877  5.72     44,751  5.08       7

  Goodwill                           2,904            2,904             -

  Core deposit and other
   intangible assets                   142              210           -32

  Other assets                       2,976            3,251            -8
                                    ------           ------

    Total assets                   $53,899           51,116             5%
                                    ======           ======

  LIABILITIES AND STOCKHOLDERS'
   EQUITY

  Interest-bearing deposits
    NOW accounts                   $   393   .50        609   .33     -36%
    Savings deposits                15,021   .88     15,286   .59      -2
    Time deposits                    8,531  3.01      6,901  2.18      24
    Deposits at foreign office       4,018  2.93      3,000  1.15      34
                                    ------           ------
     Total interest-bearing
        deposits                    27,963  1.82     25,796  1.07       8
                                    ------           ------
  Short-term borrowings              4,979  2.98      5,065  1.17      -2
  Long-term borrowings               6,346  4.21      5,741  3.39      11
                                    ------           ------
  Total interest-bearing
   liabilities                      39,288  2.35     36,602  1.45       7

  Noninterest-bearing deposits       8,121            7,917             3

  Other liabilities                    718              903           -20
                                    ------           ------

    Total liabilities               48,127           45,422             6

  Stockholders' equity               5,772            5,694             1
                                    ------           ------
    Total liabilities and
     stockholders' equity          $53,899           51,116             5%
                                    ======           ======

  Net interest spread                       3.37             3.63
  Contribution of interest-free
   funds                                     .42              .27
  Net interest margin                       3.79%            3.90%


Media Contact: 

C. Michael Zabel 

(716) 842-5385

Investor Contact:

Donald J. MacLeod

(716) 842-5138